JSE-listed Vukile Property Fund on Thursday reported a 7.5% growth in dividends to 78.1c a share for the six months ended September 30.
This is in line with the company’s full-year guidance, CEO Laurence Rapp said.
The JSE-listed real estate investment trust’s (Reit’s) distributable income increased by 23.3% from the prior half-year to R713.5-million in the period under review, with its net asset value (NAV) increasing to 2 027c a share.
These results, Rapp said on Thursday, reflected the diversification benefits from significant growth in Vukile’s Spanish investments, as well as a solid operational performance that drives Vukile’s core South African retail property portfolio in a “relentlessly difficult domestic operating environment with no immediate signs of improvement”.
He further highlighted that Vukile now holds 50% of its total R32.2-billion property assets offshore, with 46% of the portfolio located in Spain and 4% in the UK.
With strong asset management driving both its Southern African retail portfolio and Spanish investment strategy, Rapp believes Vukile is “comfortably on track” for long-term growth and sustainability, and also to deliver dividend growth for the full 2019 financial year.
However, impacting on the overall business environment, he said, was the tough trading environment in South Africa.
Relative to South Africa, the Spanish outlook is more upbeat and offers distinct benefits to Vukile’s investors, Rapp said, adding that Spain’s GDP growth remains ahead of Western Europe’s, its employment rate continues to rise, and its e-commerce remains flat at 5% of total retail sales.
Vukile’s directly held domestic portfolio is valued at R14.5-billion, with 91% retail assets, and it achieved 5.1% like-for-like growth in net property income and positive retail rental reversions of 4.3% despite difficult trading conditions. Retail vacancies were stable at 3.4% with impressive tenant retention of 87%, and contractual rental escalations at an inflation-beating 7.1%.
Additionally, Rapp said, fibre will be installed at 35 of Vukile’s malls by mid-December, 20 of which will offer its customers free WiFi. The WiFi will be used to source additional customer information, which Vukile intends to use to enhance its service and retail value offerings.
Outside of South Africa, Vukile’s investment in Spanish properties increased from €308-million to around €900-million during the period, following the acquisition of five dominant shopping centres. These significantly strengthen an already strong portfolio, allowing for further diversification and de-risking.
Besides the significant overall growth in Vukile’s Spanish assets, the Reit has also achieved about 9% like-for-like growth in gross asset value on the initial acquisition price.
This growth in asset values signals that Vukile bought well in Spain and Castellana has added value with yield-enhancing asset management initiatives which have reduced vacancies and costs, improved tenant mixes and metrics, and increased income streams and property values, Rapp added.
The nine retail parks that Vukile acquired in Spain during 2017 are now fully let.
As its international investment grows, Vukile aims to hedge 75% of its dividend flow from offshore investments over a three- to five-year period to provide investors with predictable, stable rand-denominated income streams built off high-quality European assets.